Exit Load: The Cost of Leaving Early

An exit load is a one-time charge deducted from your redemption proceeds if you exit a scheme before a specified holding period. Its purpose is to discourage short-term churn, which forces the manager to sell holdings at inconvenient times.

Typical structures

• Equity funds: commonly around 1% if redeemed within 12 months, nil after.
• Liquid and overnight funds: nil, or a small graded load for the first few days.
• Short-duration debt funds: often nil or a short window of a few months.
• ELSS: no exit load, because the 3-year lock-in already prevents early exit.

How it differs from the expense ratio

The expense ratio is ongoing and unavoidable; the exit load is one-off and entirely avoidable by holding long enough. Exit load is also charged on the redemption value, so it applies to your gains as well as your capital.

Check before you switch

Switching between schemes, or from a regular to a direct plan, counts as a redemption. Confirm both the exit load and the capital-gains consequence before moving money.